Tennessee Lottery Retailer Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain a Tennessee Lottery Retailer Bond
At a Glance:
- Lowest Cost: 1.5% of the bond amount per year based on the applicant’s credit
- Bond Amount: Determined on a case by case basis (more on this later)
- Who Needs it: All Tennessee lottery retailers who do not meet the lottery corporation’s creditworthiness requirements
- Purpose: To ensure the public will receive compensation if the retailer fails to remit all funds owed to the lottery corporation
- Who Regulates Video Lottery Retailers in Tennessee: The Tennessee Education Lottery Corporation
Background
Tennessee Statute 2.03 requires all lottery retailers operating in the state to obtain a certificate of authority with the lottery corporation prior to selling tickets. The Tennessee legislature enacted the certification laws and regulations to ensure that retailers engage in ethical business practices. To provide financial security for the enforcement of the certification law, retailers who do not meet the lottery corporation’s creditworthiness requirements must purchase and maintain a surety bond to be eligible for certification.
What is the Purpose of the Tennessee Lottery Retailer Bond?
Tennessee requires retailers who do not meet the lottery corporation’s creditworthiness requirements to purchase a surety bond as part of the application process to obtain a retailer certificate of authority. The bond ensures that the public will receive compensation for financial harm if the retailer fails to comply with the regulations set forth in the retailer policy manual. Specifically, the bond protects the public in the event the retailer fails to remit all funds owed to the lottery corporation. In short, the bond is a type of insurance that protects the public if the retailer violates certification law.
How Can an Insurance Agent Obtain a Tennessee Lottery Retailer Bond?
BondExchange makes obtaining a Tennessee Lottery Retailer surety bond easy. Simply log in to your account and use our keyword search to find the “lottery” bond in our database. Don’t have a login? Gain access now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone at (800) 438-1162, email, or chat from 7:30 AM to 7:00 PM EST to assist you.
At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.
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How is the Bond Amount Determined?
The lottery corporation will run a credit check on the retailer after they submit their certificate application. The lottery corporation will use the information gathered from the credit check to determine the retailer’s required bond amount. The bond will be in an amount that the lottery corporation deems sufficient to protect themselves in the event the retailer fails to remit all funds owed.
Is a Credit Check Required for the Tennessee Lottery Retailer Bond?
Surety companies will run a credit check on the owners of the retail company to determine eligibility and pricing for the Tennessee Lottery Retailer bond. Owners with excellent credit and work experience can expect to receive the best rates. Owners with poor credit will likely be declined by some surety companies or pay higher rates. The credit check is a “soft hit”, meaning that the credit check will not affect the owner’s credit.
How Much Does the Tennessee Lottery Retailer Bond Cost?
The Tennessee Lottery Retailer surety bond can cost anywhere between 1.5% to 5% of the bond amount per year. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. The chart below offers a quick reference for the approximate bond cost on a $10,000 bond requirement.
$10,000 Lottery Bond Cost
| Credit Score | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 800+ | $150 | $15 |
| 650 – 799 | $200 | $20 |
| 600 – 649 | $500 | $50 |
*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.
Who is Required to Purchase a Bond?
Tennessee statute 2.05 grants the lottery corporation the authority to require any retailer to purchase a surety bond prior to receiving a certificate of authority. To determine whether or not a retailer needs a bond, the lottery corporation will conduct a credit check after the retailer submits their application. Retailers with poor credit may be required to purchase a surety bond.
BondExchange now offers monthly pay-as-you-go subscriptions for surety bonds. Your customers are able to purchase their bonds on a monthly basis and cancel them anytime. Learn more here.
How do Lottery Retailers Apply for a Certificate of Authority in Tennessee?
Lottery retailers in Tennessee must navigate several steps to secure their certificate of authority. Below are the general guidelines, but applicants should refer to the retailer policy manual for details on the process.
Contract Period – All Tennessee Retailer Contracts are valid for one year from the date of issuance and must be renewed before the expiration date
Step 1 – Complete the Application
All Tennessee regulatory lottery retailer applications must be mailed to the following address:
Tennessee Education Lottery Corporation
P.O. Box 291869
Nashville, TN 37229-9715
Retailers must pay a $95 application fee (per location), undergo a background check, and have their bank complete the EFT portion of their application. Retailers can request an application packer here.
Step 2 – Purchase a Surety Bond
After the retailer submits their application, the lottery corporation will run a credit check to assess the retailer’s creditworthiness. Retailers who do not meet the lottery corporation’s creditworthiness standards may need to purchase a surety bond in an amount set by the lottery corporation.
How Do Tennessee Lottery Retailers Renew Their Contract?
The lottery corporation will send the retailer a renewal packet prior to their contract’s expiration date. All Tennessee Retailer Contracts are valid for one year from the date of issuance and must be renewed before the expiration date.
What Are the Insurance Requirements for Tennessee Lottery Retailers?
Tennessee does not require lottery retailers to obtain any form of liability insurance as a prerequisite to obtaining a certificate of authority. Retailers who do not meet the lottery corporation’s creditworthiness standards may need to purchase a surety bond in an amount set by the lottery corporation.
How Do Tennessee Lottery Retailers File Their Bond?
Retailers should submit their completed bond form, including the power of attorney, to the following address:
Tennessee Education Lottery Corporation
P.O. Box 291869
Nashville, TN 37229-9715
The Tennessee Lottery Retailer surety bond requires signatures from both the surety company that issues the bond and a representative from the retail organization. The surety company should include the following information on the bond form:
- Legal name and address entity/individual(s) buying the bond
- Surety company’s name and state of incorporation
- Bond amount
- Date the bond goes into effect
- Date the bond is signed
What Can Tennessee Lottery Retailers Do to Avoid Claims Against Their Bond?
To avoid claims against their bond, lottery retailers in Tennessee must ensure that they remit all funds owed to the lottery corporation.
What Other Insurance Products Can Agents Offer Lottery Retailers in Tennessee?
Tennessee does not require lottery retailers to obtain any form of liability insurance as a prerequisite to obtaining a certificate of authority. However, most reputable businesses will seek to obtain this insurance anyway. Bonds are our only business at BondExchange, so we do not issue liability insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.
How Can Insurance Agents Prospect for Tennessee Lottery Retailer Customers?
Tennessee conveniently provides a public list to search for active lottery retailers in the state. The list can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.